Charben Haulage v Beilby

Background 3 The defendants are a firm of solicitors. They were instructed by the plaintiff to act on its behalf in relation to the purchase of a block of land at 692B Pacific Highway, Killara, known as "Lot U" from Caltex Petroleum Pty Limited ("Caltex"). 4 On 4 December 1998, the plaintiff exchanged contracts with Caltex for the purchase of Lot U. Lot U had previously been the site of a service station, as a result of which it had become contaminated with hydrocarbons. 5 The contract, inter alia, provided: " 44.2 Works

(a) after the Vendor removes the tanks in accordance with clause 44.1, the Vendor will cause its environmental consultant to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which will permit the use of the property for the Purchaser's proposed use which the Purchaser acknowledges shall be in accordance with the purposes and uses permitted by the present zoning of the property (the 'Works')

(b) upon completion of the Works, the Vendor will provide the Purchaser with an environmental report (the 'Environmental Report') from its environmental consultant which indicates that the Works have been completed;

(c) completion is conditional upon completion of the Works and the Vendor providing the Purchaser with the Environmental Report;

(d) the Vendor is unable to determine the time required for the completion of the Works and the Purchaser shall not make any requisition, objection, claim for compensation or other claim in respect of the Works being delayed by reason of the Vendor obtaining the necessary consents from the local authorities to commence and complete the Works, adverse weather, the rate of evaporation or anything else beyond the control of the Vendor.

(e) the Vendor does not represent or warrant that the Purchaser will be entitled to use the property for the Purchaser's proposed use specified in clause 44.2(a) nor that the zoning of the property permits or will permit that use and that the Purchaser has satisfied himself in relation to the use to which he will be entitled to undertake on the property. 44.4 Release and indemnity (a) From the date of completion, the Purchaser releases and discharges the Vendor from all actions, suits, causes of action, claims and demands (including, without limitation, any claim or demand for costs or expenses) which the Purchaser: (i) now has; or (ii) may have in the future, against the Vendor arising out of or in any way connected with the Works, the Environmental Report, or any environmental contamination in, under or on the property or in, under or on land which is in the vicinity of the property. (b) From the date of completion, the Purchaser indemnifies the Vendor against any claims, liability, demands, suits, proceedings, losses, costs, penalties or damages incurred by the Vendor as a result, directly or indirectly, of the existence or otherwise of the Works, the Environmental Report or any environmental contamination in, under or on the property or in, under or on land which is in the vicinity of the property.

If the Purchaser is not satisfied (acting reasonably) that the Environmental Report indicates that the Works have been completed so as to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which will permit the Purchaser's proposed use of the property as specified in clause 44.2(a) then the Purchaser may so notify the Vendor (but only within seven (7) days after the Vendor provides the Purchaser with the Environmental Report and in this respect time is of the essence). Upon receipt of such notice, the Vendor may either:

(a) rescind this contract and refund the deposit monies paid under this contract to the Purchaser and the provisions of clause 19 shall therefore apply; or

(b) refer the Environmental Report to a certified contaminated site auditor (Auditor) who will determine whether the Works have been completed so as to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which will permit the Purchaser's proposed use of the property as specified in clause 44.2(a).

The Auditor to whom the Environmental Report is referred pursuant to paragraph (b) will act as an expert and not as an arbitrator and the determination of the Auditor will be final and binding on the parties." 6 On 16 February 2000, Caltex provided the defendants with the Environmental Report (the Report). The Report had been prepared by Environmental and Earth Sciences Pty Limited ("EES"), environmental consultants. The Report concluded: "Remedial works undertaken on 692B Pacific Highway, Killara, Sydney, included the removal of fourteen USTs and associated fixtures, validation of the excavations, removal of heavy metal contaminated fill material and validation of the site.

All known primary sources of hydrocarbon contamination including 14 USTs and associated pipework have been removed from the site.

Organic laboratory results for TPH, BTEX, PAH, phenols and inorganic results for lead, confirm that the USTs and pipeline excavations have been validated according to the NSW EPA (1994) - Threshold concentrations for sensitive land use - soils given in the NSW EPA (1994) - Guidelines for assessing service station sites.

Validation analysis of bioremediated backfill shows that all TPH, BTEX, lead and other heavy metals are below the above mentioned guidelines.

The laboratory results for TPH, BTEX, PAH, phenols, and lead on samples collected from boreholes and validation samples covering the remainder of the site confirm that the subsurface soils have been validated according to the NSW EPA (1995) - Sampling design guidelines and were below the values given in the NSW EPA (1994) - Threshold concentrations for sensitive land use - soils given in the (1994) - Guidelines for assessing service station sites (Table 4).

Given the above, validation results for potential contaminants associated with a former service station site, show that this site is suitable for residential landuse in accordance with the relevant guidelines." 7 The plaintiff did not give notice to Caltex under cl 44.5 of the contract and, on 16 March 2000, the purchase was settled. 8 The property contained a level of hydrocarbons which was unacceptable for the use to which the plaintiff proposed to put the site. As a result, the plaintiff incurred significant expense in further remediating the land. 9 The plaintiff brought proceedings in the Federal Court against Caltex and EES to recover its loss: Charben Haulage Pty Ltd v Environmental & Earth Sciences Pty Ltd [2004] FCA 403. 10 The plaintiff was successful in the Federal Court proceedings at first instance, but unsuccessful on appeal: Caltex Australia Petroleum Pty Ltd v Charben Haulage Pty Ltd [2005] FCAFC 271.

The Federal Court proceedings at first instance 11 His Honour, the trial judge, stated that the plaintiff's primary case against Caltex was for alleged breaches of the covenants contained in cl 44 of the sale agreement. In particular, it was alleged Caltex failed to cause its environmental consultant to reduce the levels of petroleum hydrocarbon pollution to a level that would permit use of the allotment for the plaintiff's proposed use. It also claimed that the Report contained significant misrepresentations, including the statement that Lot U had been remediated to a standard suitable for residential land use. 12 His Honour held that: "[157] … [the plaintiff's] contractual claim against Caltex depends on cl 44.2(a) of the contract of sale. Caltex there covenanted that, after its removal of the USTs, it would 'cause its environmental consultant to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which will permit the use of the property for [the plaintiff's] proposed use', being a use in accordance with the zoning.

[158] Caltex's environmental consultant, EES, did not reduce the level of petroleum hydrocarbon contamination of Lot U to a level that would permit its use for a combined residential/commercial building (as then proposed by [the plaintiff]) or even for a wholly commercial building (as later proposed and implemented). However, counsel for Caltex argue that this does not mean their client breached cl 44.2(a) of the contract for sale.

[164] The argument of counsel for Caltex seems to be that it was sufficient for their client to instruct EES to reduce the levels of hydrocarbon pollution to the requisite level; if Caltex gave the appropriate instruction, Caltex 'caused' EES to do this; so is not responsible for any failure by EES properly to implement that instruction.

[165] I do not read cl 44.2(a) in this way. First, the argument overlooks the significance of the word 'cause'. The primary meaning of that word, according to the Macquarie Dictionary, whether used as a noun or verb, is 'that which produces an effect'. Another meaning is 'to be the cause of; bring about'. Applying those meanings to cl 44.2(a), it is apparent that Caltex's obligation was to produce the effect that its environmental consultant reduced the pollution level to the requisite degree; or to be the cause of that happening. The clause required more than an ineffective instruction." 13 Accordingly, the plaintiff's breach of contract claim against Caltex succeeded. 14 His Honour noted: "[162] Clause 44.5 was not invoked by [the plaintiff]. It could not have been invoked. It will be remembered that cl 44.5 applies where 'the Purchaser is not satisfied... that the Environmental Report indicates that'. [The plaintiff's] grievance does not relate to the contents of Report 19844C. The contents of the report were entirely satisfactory. The report stated that Lot U 'is now suitable for any landuse'. Even if [the plaintiff] had known, at the time, that this statement was false, this knowledge would not have enabled it to invoke cl 44.5.

[175] … I have also held that Charben's right to object to an unsatisfactory environment report, under cl 44.5, is irrelevant to this issue; there was nothing wrong with the terms of the report, only with its accuracy and the sufficiency of the remediation works that were required to be undertaken under cl 44.2(a)." 15 The plaintiff's other claims against Caltex failed. The claim under the Trade Practices Act failed because Caltex played no part in the formulation of the Report, did nothing to convey the impression that it was adopting the contents of the Report and there was no evidence that it knew the Report contained misleading information; the claim for negligent misstatement failed because it was not possible to treat the Report as a statement by Caltex; and the negligence claim failed because there was no evidence that anybody representing Caltex knew that the work proposed by EES would be insufficient to enable EES properly to certify that the allotment was fit for the plaintiff's proposed use. 16 The plaintiff was successful in its claim against EES for breach of the Trade Practices Act. The claim for negligent misstatement failed, as all that could be said was that a person had produced a report on a technical matter for a client, knowing the report would be likely to be passed on to someone else, who might rely upon it in making a decision to purchase the allotment. That was not sufficient. The claim in negligence failed for lack of the requisite duty of care.

The Federal Court proceedings on appeal 17 The Full Federal Court held: (a) "… the primary judge misconstrued clause 44": [80]. (b) "… unless the challenge contemplated by clause 44.5 was triggered, the Environmental Report was to be determinative of whether Caltex had performed its obligation under cl 44.2": [77]. (c) The word ' indicates ' in clauses 44.2(b) and 44.5 must be construed in the light of the scheme of cl 44 just outlined. It does not mean simply that the environmental report states in terms that the Works had been completed. It would not be sufficient to satisfy the condition in clause 44.2(c) for Caltex to provide a report that did no more than state that the Works had been completed. It required something more than that. Clause 44.5 would be otiose if the word ' indicates ' simply meant ' states '. It must mean that the environmental report demonstrates on its face, in professional detail, in accordance with appropriate guidelines, that the levels of pollution have been reduced to the relevant level": [73]. (d) "…The parties evinced a clear and unequivocal intention that, once completion had occurred, [the plaintiff] was to have no claim against Caltex in any way connected with the Works, the Environmental Report or any environmental contamination of Lot U": [78]. (e) "However, so long as any report that was provided as the Environmental Report satisfied the requirements of Clause 44.2(b), [the plaintiff] did not have any option but to complete the purchase of Lot U, unless it exercised its rights under Clause 44.5 to notify Caltex that it was not satisfied that the Environmental Report indicated that the Works had been completed. If Report 19844C satisfied the requirements of Clause 44.2(b), [the plaintiff] simply had no option but to complete the Caltex Contract": [181]. (f) "The evidence before the primary judge does not support a finding that [the plaintiff] was induced by the Report 19844C Representations to enter into or complete…the Caltex Contract. Accordingly, the cause of action under s 82 of the Trade Practices Act consequent upon alleged contravention of s 52 of the Trade Practices Act must fail": [186]. (g) "As indicated above, it was not suggested on the hearing of the appeal that Report 19844C did not indicate that the Works, as defined, had been completed. Indeed, the proceeding appears to have been conducted on the basis that Report 19844C satisfied clause 44.2(b) of the Caltex Contract, in that it was an environmental report from Caltex's environmental consultant ' which indicates that the Works have been completed '. That is to say, the parties appear to have accepted that Report 19844C indicates that Works consisting of the reduction of the levels of petroleum hydrocarbon pollution of Lot U, caused by its use as a service station, to a level that would permit the use of Lot U in accordance with the purposes and uses permitted by the present zoning of Lot U, had been completed. It is tolerably clear from the evidence summarised above that Mr Beilby understood that Report 19844C indicated, in the relevant sense, that the Works had been completed and, in reliance upon and induced by that indication, advised Charben to complete the purchase of Lot U": [260] (h) "The case was conducted on the basis that Report 19844C satisfied clause 44.2(b) of the Caltex Contract. That is to say, it was an environmental report from Caltex's environmental consultant ' which indicates that the Works have been completed '. It was not suggested on the hearing of the appeal that Report 19844C did not indicate that the Works had been completed. It must follow that Report 19844C indicates that works consisting of the reduction of the levels of petroleum hydrocarbon pollution of Lot U, caused by its use as a service station, to a level that would permit the use of Lot U for [the plaintiff's] proposed use, in accordance with the ' BUSINESS 3(a) - (A2) RETAIL SERVICES ' zoning of Lot U, had been completed": [190] 18 As regards EES, the Full Court held: "The evidence before the primary judge does not support a finding that [the plaintiff] was induced by the Report 19844C Representations to enter into or complete…the Caltex Contract. Accordingly, the cause of action under s 82 of the Trade Practices Act consequent upon alleged contravention of s 52 of the Trade Practices Act must fail": [186]. 19 The Full Federal Court stated: (a) "It is by no means clear that, in such circumstances, EES was not under a duty to take care in providing Report 19844C, even if EES had no knowledge of the terms of the Caltex Contract": [266]

(b) "[The plaintiff] seeks to support the orders of the primary judge against EES on the basis of its pleading of negligence. In essence, the claim in negligence was that EES owed a duty to [the plaintiff] to take care in carrying out the work of reducing the levels of petroleum hydrocarbon pollution of Lot U to a level that would permit the use of Lot U in accordance with the purposes and uses permitted by the then present zoning of Lot U. [The plaintiff] asserted in the Statement of Claim that, in the circumstances referred to in paragraphs 17A and 18 of the Statement of Claim, EES breached that duty, in that it carried out that work negligently": [267]

(c) "Having concluded that there was no duty of care owed by EES to [the plaintiff] as the purchaser of Lot U, his Honour did not examine the evidence with a view to determining whether there was a breach of such a duty, on the part of EES, in reducing the levels of pollution. That question had nothing to do with whether Report 19844C contains false representations about the Guidelines. On the other hand, the question has a lot to do with whether the Works were carried out in a non-negligent manner. Of course, whether the remediation work complied with the Guidelines may be relevant to the question of negligence": [271]

(d) "The principles for determining when a purchaser of land will have an entitlement to recover damages for economic loss from a defendant who provided services negligently to the purchaser's predecessor in title are by no means clear": [273]

(e) "…the prerequisites are not established for EES to have a common law liability in tort to [the plaintiff] for carrying out the Works in a negligent fashion or in breach of a duty owed to [the plaintiff], assuming that, on investigation, negligence in carrying out the Works were established (see Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 ; (2004) 216 CLR 515 at [31] and [80])": [287]

The present proceedings 20 The plaintiff, by statement of claim filed in this court on 20 February 2006, sought damages from the defendants for professional negligence. It was alleged the defendants were in breach of retainer and of their duty of care and were guilty of misleading and deceptive conduct. The defendants have denied liability to the plaintiff. 21 In its third further amended statement of claim, the plaintiff has alleged, in essence, that the defendants failed to warn it that signing and exchanging the contract with Caltex would or might involve it incurring significant legal risks, with consequential commercial risks including site risks, and that, having regard to those matters, unless the plaintiff was willing and/or able to undertake such risks, it would be imprudent for the plaintiff to sign and exchange the contract, or alternatively, the plaintiff should take these matters into account in determining whether to sign and exchange the contract. It was alleged that had the plaintiff been so warned, it would not have signed and exchanged the contract. These allegations related to the period prior to the exchange of contracts and prior to the receipt of the Report. 22 It was further alleged in the third amended statement of claim that upon receipt of the Report the defendants represented the site was clean and that the plaintiff should proceed to settle the transaction. However, the Report was deficient and the plaintiff would have been entitled to object under the contract, and would have objected, had it been aware of the deficiencies. The plaintiff alleged the defendants failed to advise the plaintiff of its entitlement to object. 23 The third amended statement of claim pleaded: " Deficiencies in the Lot U Report 44. The Lot U report received by Beilby did not indicate that the Lot U Remediation was complete so as to reduce the levels of Contamination as specified in special condition 44.2(a) in that the Lot U report"

then followed particulars of the alleged deficiencies in the Report.

The issues on the application 24 The construction of the Caltex contract, as determined by the Full Federal Court, was expressly accepted by both counsel in these proceedings. 25 There are two issues which require determination on this application:

(a) Whether the plaintiff's pre-exchange causes of action against the defendants are statute-barred.

(b) Whether the plaintiff's post-exchange causes of action should be stayed or dismissed, pursuant to the principles espoused in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 and Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198.

The first issue - whether the plaintiff's pre-exchange causes of action against the defendants are statute barred 26 The plaintiff conceded the pre-exchange causes of action based on events prior to 4 December 1998 for breach of contract, under the Trade Practices Act and under the Fair Trading Act, are statute barred. Accordingly, the first issue was confined to whether the pre-exchange cause of action in negligence is statute barred.

Principles 27 A cause of action in negligence does not accrue until actual non-negligible loss is suffered by the plaintiff as a result of the breach. It is then that time begins to run - Wilson v Rigg [2002] NSWCA 246 [23]. 28 Actual loss occurs, relevantly, where, when the first binding step is taken, whatever extrinsic circumstances may transpire, a loss must be suffered, even if it remains undiscovered - Wardley Australia Limited v State of Western Australia (1992) 174 CLR 514 per Brennan J at 537 and see, by way of example, Winnote Pty Limited v Page (2006) 68 NSWLR 531 (lease legally ineffective to give any right in respect of peat mining), Scarcella v Lettice [2000] NSWCA 389; (2000) 51 NSWLR 302 (defect in title) and HTW Valuers (Central Qld) Pty Limited v Astonland Pty Limited (2004) 217 CLR 640 (actual loss resulting from purchase at overvalue). 29 Actual loss is to be distinguished from contingent loss in respect of which the cause of action does not accrue until the contingency has been fulfilled - Wardley at 527. Contingent loss is incurred where an adverse risk which may never eventuate comes to pass. When it does, but only then, is loss suffered - Murphy v Overton Investments Pty Limited (2004) 216 CLR 388 at [55]. 30 As Hodgson JA observed in Segal v Fleming [2002] NSWCA 262: "…where a person incurs a chance, even a substantial chance, of suffering a loss, in due course it may become clear that no loss is ultimately suffered; and so long as there is some appreciable chance that no loss will be suffered, it is unreasonable to require a plaintiff to commence proceedings and unreasonable to award damages against a defendant. However, once there is actual loss, even if there is also the chance of further loss, a plaintiff must commence proceedings within the appropriate limitation period, and can obtain damages reflecting actual loss suffered plus damages reflecting the chance of any further loss." 31 Handley JA observed in Scarcella v Lettice at [24] that: "The general principle is that time runs from when the cause of action is complete, whether or not this is discovered or discoverable. The exceptions for latent defects in buildings, latent defects in title, and prospective and contingent losses are only apparent exceptions to this general rule. They depend in each case on a finding that the particular form of economic loss had not been suffered when the plaintiff became committed to the risk, but only later when the risk actually accrued." 32 Whether and when damage is suffered is a matter of fact - Wilson v Rigg [23].

Submissions 33 The defendants submitted the Full Federal Court held that all that the contract required of Caltex was to provide a report indicating that the work necessary to decontaminate the site had been undertaken, not that the work had achieved the desired result. Thus the bundle of rights that the plaintiff actually obtained on exchange of contracts was such that it was only entitled to a report indicating that certain works had been done but not a bundle of rights whereby Caltex was obliged to provide a report proving or certifying that the works had achieved the outcome of decontamination. Accordingly, the damage occurred upon the exchange of contracts as it was then that the plaintiff suffered a non-negligible, actual and quantifiable loss, being the difference between the purchase price and the (lesser) true market price of the land. Accordingly, the cause of action was statute barred as the action was commenced more than six years after the exchange of contracts. 34 The plaintiff submitted that it suffered no loss on exchange of contracts because, at the time of exchange, it was not bound to purchase contaminated land, it was simply bound to permit Caltex to continue the remediation process until such time as it stated that it had completed the remediation process and provided a report to the plaintiff intended to satisfy the plaintiff that the remediation process had been completed. This process of remediation continued from the date of exchange (4 December 1998) until the Lot U Report was provided to the plaintiff's solicitor (being the defendants) on or about 16 February 2000. On providing the Report, the plaintiff was still not bound to purchase the contaminated land, as the contract entitled the plaintiff to, within seven days of receipt of the Report, object to the Report if it was not satisfied (acting reasonably) that the Report indicated that the remediation works had been completed. If such objection was taken by the plaintiff, a contractual mechanism took effect, whereby Caltex could:

(a) rescind the contract and refund the deposit monies to the plaintiff (cl 44.5(a)); or

(b) refer the Report to a certified auditor to determine whether the remediation works had been completed. 35 In either case, the plaintiff would not have suffered any loss. The damage, being the difference between the purchase price and the market value of the contaminated land, was suffered, at the very earliest, when the plaintiff was bound to complete the purchase of the contaminated land. That could only have occurred following the expiration of the seven day period after receipt of the Lot U Report (that is, 23 February 2000) if not thereafter. As the seven day period expired on or about 23 February 2000, and the statement of claim was filed on 20 February 2006, the pre-exchange cause of action in negligence was not statute-barred.

Determination 36 When the plaintiff entered into the Caltex contract it sustained a detriment, in a general sense, in that it became exposed to potential obligations, liabilities and risks that it otherwise would not have had (c/f Wardley at 527). 37 However, actual loss would only be suffered if there was:

(a) a failure to reduce the levels of petroleum hydrocarbon pollution of the property caused by the use of the property as a service station to a level which would permit the use of the property for the purchaser's proposed use (as provided in cl 44.2(a)) in circumstances where, as the Full Federal Court stated at [77], "The clear intent of clause 44.2 was to impose upon Caltex an obligation to cause the Works to be carried out."

(b) a failure to give notice within seven days of receipt of the Report pursuant to cl 44.5. 38 In my opinion each of those risks was a contingency and it was only in the event that both contingencies eventuated that the plaintiff would suffer any actual loss. 39 In this case both contingencies eventuated and actual loss was sustained. The second contingency eventuated when the time for giving notice pursuant to cl 44.5 expired. It was on that day, 23 February 2000, that the plaintiff became bound to settle the purchase of Lot U. Time then began to run. The statement of claim was filed within six years of that date on 20 February 2006. Accordingly, the pre-exchange cause of action in negligence is not statute barred. 40 I note that in Wardley it was observed (at 533) that it was "…undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question." 41 However, in the present case sufficient was known of the damage sustained by the plaintiff and its circumstances to permit the limitation question to be addressed. No submission was made by either counsel that it was inappropriate to determine the limitation question on an interlocutory basis in this case.

The second issue - Whether the plaintiff's post-exchange causes of action should be stayed or dismissed

Submissions 42 The defendants submitted the post-exchange causes of action should be permanently stayed or dismissed on two bases, namely:

(a) there was available to the plaintiff a cause of action which it could have litigated against EES in the Federal Court and which it did not litigate, namely an action in negligent misstatement, negligence, or pursuant to s 52 of the Trade Practices Act asserting that the Report did not indicate in the relevant sense the appropriate matters or that it negligently came to the conclusion expressed by it. Because the plaintiff did not litigate those issues, this court should not allow the plaintiff to litigate on a factual basis certain facts relating to the unlitigated cause of action, namely, that the Report was deficient, as the plaintiff now alleges;

(b) the plaintiff in the Full Federal Court accepted that the Report indicated the works had been completed. The proceedings in the Full Federal Court were conducted on that basis. The plaintiff in this court contends, contrary to that position, that the Report was deficient in the relative indicative sense. Accordingly, to permit the plaintiff to rely on that argument would run the risk of a judgment inconsistent with that of the Full Federal Court resulting in proceedings which may threaten the integrity of the administration of justice if they raised the prospect of conflicting judgments. 43 Defendants' counsel, in his submissions in reply, revised his submission in respect of the second basis. He said that "On reflection the fact that [the plaintiff] adopted that forensic position is irrelevant to the Rippon point in the sense that in both Anshun and Rippon it wasn't to the point whether or not parties adopted a position; it was simply to the point of whether the subsequent matter was so relevant to the earlier one and the possibility of conflicting judgments. Having said that, [the plaintiff's] forensic position of positively propounding that the report was correct or perhaps positively propounding that there was nothing wrong with the report in the relevant sense as found by the Full Federal Court is an additional factor that your Honour is entitled to take into account."

General principles 44 In Anshun at 602 it was held "…there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter, it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding." 45 As was observed by the Court of Appeal in Champerslife Pty Limited v Manojlovski [2010] NSWCA 33 [4]: "The mere fact that the matter could have been raised does not mean it should have been raised (for the operation of the principle). Rather, it has to be so relevant as to make it unreasonable not to raise it." 46 There are a variety of circumstances why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, eg expense, importance of the particular issues, motives extraneous to the actual litigation, etc. - Anshun at 603. 47 In Anshun (at 603) it was said: "It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment… The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as the foundation for a cause of action in a second proceeding. By 'conflicting' judgments, we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction." 48 In Rippon the plaintiff was held to be estopped from raising an issue against a defendant where the same issue had been unsuccessfully raised by him in earlier proceedings against a different defendant. The court applied Reichel v Magrath (1889) 14 App Cas 665 at 668 where it had been held: "…it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same again…there must be an inherent jurisdiction in every court of justice to prevent such an abuse of its procedure…" 49 In Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 at 414 Hunt CJ at CL distilled the following statement of principle from the authorities: "There are obviously limitations to striking out pleadings or causes of action as an abuse of process upon the basis stated in Reichel v Magrath. The issue determined in the earlier case which is sought to be litigated in the later case must be one which the party propounding it in the later lost in the former. The principle does not work in reverse to enable the party who won the issue in the earlier case to prevent it being litigated in the later proceedings by someone who was not a party in the former proceedings. It must be an issue which was necessarily determined in the earlier case, and one of importance to the final result. It must have been properly argued - by which I mean that…the tribunal which decided it was an appropriate one to do so, that the parties were appropriate contradictors and that the issue was regarded by them as one of importance…In normal circumstances the decision disposing of the issue must have been a final one - by which I mean it was not subject to appeal. There may also be circumstances in which, notwithstanding the absence of an appeal, it is clear that the earlier decision has overlooked some binding authority, or that it has caused the successful party a manifest injustice…all the circumstances of the determination in the earlier case may be considered." 50 In considering whether an Anshun estoppel has been established it is necessary to bear in mind that "shut[ting] out a claim…a party wishes to pursue, without determination of its intrinsic merit, on the ground that it ought to have been raised in earlier litigation…is a serious step, [and] a power not to be exercised except 'after a scrupulous examination of all the circumstances'." ( Habib v Radio 2UE Sydney Pty Limited [2009] NSWCA 231 at [85]). 51 The power to stay proceedings permanently on the ground that they are an abuse of process should be exercised with caution and only in the most exceptional or extreme case. The onus of satisfying the court that there is an abuse of process lies upon the party alleging it, and it is "a heavy one" - Habib at [79]. 52 In General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 it was stated: "…the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion."

Determination 53 It was common ground the Anshun principle was potentially applicable where there was a failure to litigate an issue in the first proceedings and the same issue was raised by the same party in later proceedings between the original parties. 54 The defendants sought to apply the Anshun principle to the situation here where the later proceedings were brought by the plaintiff against a different party. 55 The plaintiff submitted the Anshun principle had no application where the later proceedings were against a different defendant. The plaintiff's submission was supported by the distillation of principle in Haines (see [49] above) which required that the issue had been "necessarily determined in the earlier case". 56 However, in Habib McColl JA (with whom Giles and Campbell JJA agreed) said, at [83]: "An Anshun estoppel also arises where an omission to plead a claim or defence will contribute to the existence of conflicting judgments, including those which are contradictory, though they may not be pronounced on the same cause of action as long as they appear to declare rights which are inconsistent in respect of the same transaction. Thus an Anshun estoppel will apply even though the parties to the second proceedings are not the same as in the first. Although there may be 'no question…of oppression and unfairness' where the parties in the second action 'were not parties to the earlier action', the new proceedings may threaten the integrity of the administration of justice if they raise the prospect of conflicting judgments." (See also Handley JA in Rippon at [19] and [24]). 57 Accordingly, I conclude the Anshun principle may be applied where the later proceedings are against a different defendant, at least, where conflicting judgments may result. 58 A crucial issue sought to be litigated in the present proceedings in respect of post-exchange liability is whether the Report indicated (in the sense determined by the Full Federal Court) that "the (remediation) Works have been completed". 59 That issue was not litigated in the Federal Court proceedings in relation to the contractual count against Caltex. There, the focus was upon the proper construction of cl 44 and the determination of whether cl 44.2(a) provided a cause of action to the plaintiff. 60 The Full Federal Court held the plaintiff's contractual rights were limited relevantly to cl 44.5 and that the Report was determinative that the "Works have been completed" unless the challenge contemplated by cl 44.5 had been triggered. 61 As it was common ground the challenge under cl 44.5 had not been triggered, the issue of whether the Report indicated (in the sense determined by the Full Federal Court) that "the (remediation) Works have been completed" was irrelevant. In those circumstances it was not unreasonable for the plaintiff not to raise the issue for determination. 62 A determination in the present proceedings that the Report does not indicate (in the sense determined by the Full Federal Court) that the works have been completed would not conflict with the judgment for Caltex on the contract issues argued in the Full Federal Court. 63 In the Federal Court proceedings the plaintiff alleged the Report was misleading and deceptive in various respects. These allegations formed the basis for the other causes of action which the plaintiff asserted against Caltex and the causes of action which it asserted against EES. 64 The plaintiff ultimately failed in respect of each of those causes of action (see [15]-[19] hereof). Not all of its allegations were considered by the court. However, the determination of those causes of action and the findings made in relation thereto did not involve findings as to the issue of whether or not the Report indicated that the "Works have been completed". 65 The determination of those causes of action will not give rise to conflicting judgments in the event the plaintiff succeeds in its action against the defendants. 66 In the course of its judgment the Full Federal Court made some comments, by way of obiter dicta, as to whether the plaintiff's case could have been formulated in other ways, in particular that

(a) "if the statement that the Works had been completed was false and misleading or deceptive for EES to provide [the Report] to Caltex, it may have been possible to conclude that there was a contravention of s 52 of the Trade Practices Act ": [191];

(b) "if that indication was made negligently in breach of a duty of care owed by [the plaintiff] there may have been a basis for liability on the part of EES": [261];

(c) "EES may have had a common law liability to [the plaintiff] in tort for economic loss if it knew that [the plaintiff] was relying or depending on EES to carry out the Works in a competent and non-negligent fashion": [288] 67 However, the Full Federal Court expressed itself in respect of these matters in guarded terms notwithstanding it had considered the evidential material before it. I am not in a position to determine the prospects of success of those causes of action, or any other possible causes of action, or if all of them necessarily would have resulted in the determination of the issue of whether the Report indicated the (remediation) works have been completed. 68 I would not regard the plaintiff as acting unreasonably in not raising the other causes of action when the original causes of action selected appeared to have reasonable prospects of success and, indeed, some did succeed at first instance. Care must be taken not to judge the plaintiff's actions in hindsight with a focus upon the potential liability of the defendants rather than the potential liability of Caltex and EES. 69 In my opinion, the basis for an estoppel against the plaintiff has not been established. 70 Further, it is clear from the authorities referred to at [50]-[52] above that the power to permanently stay or dismiss proceedings at an interlocutory stage is to be exercised sparingly. Having regard to all the circumstances of this matter and in particular the complexity of the Federal Court proceedings, the differences of opinion between the trial and appeal court and the manner in which various issues were there addressed or found unnecessary to be determined, are such that it would, in my opinion, be unjust to shut out the plaintiff's claim without a determination of its extrinsic merit. 71 In my opinion, the application fails.

2. The defendants to pay the plaintiff's costs of the application;

3. The matter to be listed before me for directions on 9 June 2010. **********

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